Fitch affirms ratings on 11 Saudi banks, revises outlook on three banks to stable from negative

By bne IntelliNews December 12, 2013

 Fitch affirmed its ratings on 11 Saudi Arabian banks, revising the outlook on three banks to stable from negative on the basis they are operating in a favourable economic environment. Being regulated by a conservative hands-on regulator and, at times of stress, their ability to count on support from a sovereign with an AA- rating and a positive outlook, also underpinned the banks ratings, Fitch underscored.

The revised outlook on three banks reflects the lower capital ratios of Saudi British Bank (SABB), Banque Saudi Fransi (BSF) and Arab National Bank (ANB) as well as higher customer exposures relative to equity in case of SABB and BSF. Moreover, Fitch sees that the low non-performing loan (NPL) ratios, high loan loss reserve coverage and strong profitability of all three banks indicate that the banks' capital bases are unlikely to need to absorb losses in the foreseeable future.

Fitch’s viability rating (VR) for the 11 Saudi banks reflects its opinion of the peculiarities of each bank. 

Al Rajhi Bank’s VR reflects the leading domestic retail franchise, low concentrations, strong profitability, sound capital ratios and asset quality, low appetite for market risk, and a large and stable retail deposit base.

National Commercial Bank's VR reflects its leading domestic franchise, strong profitability, solid capital and stable funding as well as a high lending concentrations to large corporate borrowers and rising risk appetite for international investments.

Riyad Bank's VR reflects its strong commercial franchise with leading market shares in some business lines, consistent but lower profitability ratios than larger Saudi banks, sound asset quality and capitalization coupled with moderate concentration risks in assets and liabilities.

SAMBA Financial Group's VR reflects its strong liquidity and sound capital position, resilient franchise and strong market position. However, the rating is constrained by high concentration of risks in both assets and liabilities, fairly weak earnings growth and improved asset quality ratios.

Arab National Bank reflects strong liquidity, sound asset quality, consistently sound profitability, a stable deposit base as well as some concentration in assets and liabilities.  

Banque Saudi Fransi's VR reflects strong asset quality, a stable deposit base, sound profitability, a strong corporate banking franchise and performance track record. It also reflects weakening profitability, lower capital ratios and significant large customer exposures relative to equity in an operating environment of potentially high loan growth.

Saudi British Bank's VR reflects its consistently strong profitability, earnings generation and comfortable liquidity as well as strong franchise. It also reflects the bank’s lower capital ratios and high large customer exposures relative to equity in an operating environment of potentially high loan growth.

Saudi Hollandi Bank's VR reflects its healthy asset quality, improving profitability and its strong corporate banking franchise. It also considers the rapid growth and concentration in both the bank’s assets and liabilities.

Saudi Investment Bank's VR reflects its improving financial metrics along the lines of profitability, liquidity and asset quality. Fitch remains concerned over the bank’s expose to the challenges of rapid growth in the retail banking as well as concentration in assets and liabilities.

 Alinma Bank's VR reflects its strong capital ratios, solid customer funding base, improving but low profitability.

Bank Aljazira's (BAJ) VR reflects its fast retail growth, concentrated financing book and declining capital ratios.

Name of Bank

Long-term IDR*

Short-term IDR*

Viability Rating

Support Rating

Support Rating Floor

Outlook

Al Rajhi Bank

A+

F1

a

1

A+

Stable

National Commercial Bank

A+

F1

a

1

A+

Stable

Riyad Bank

A+

F1

a

1

A+

Stable

SAMBA

A+

F1

a

1

A+

Stable

Arab National Bank

A

F1

a

1

A-

Revised Stable

Banque Saudi Fransi

A

F1

A

1

A-

Revised Stable

Saudi British Bank

A

F1

A

1

A-

Revised Stable

Saudi Hollandi Bank

A-

F2

bbb

1

A-

Stable

Saudi Investment Bank

A-

F2

bbb-

1

A-

Stable

Alinma Bank

A-

F2

bbb-

1

A-

Stable

Bank Aljazira

A-

F2

bb+

1

A-

Stable

Source: Fitch Ratings

*IDR= Issuer Default Rating

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